GOVERNMENT ACCOUNTING
WEEK FOUR (5)
DATE:…………………
TOPIC: GOVERNMENT ACCOUNTING
CONTENTS: Public Sector Accounting:
- Public sector accounting
- Sources of government revenue
- Capital expenditures.
- Recurrent expenditure.
- Head and sub-heads
- Capital and revenue account.
SUB-TOPIC 1: PUBLIC SECTOR ACCOUNTING:
Public sector can be defined as the government sector whose affairs or services are made known to the public (people in general) in aggregate and in detail reflecting all transactions involving the receipt, transfer and disposition of its fund and properties.
Public sector accounting can also be defined as the process of recording, analyzing and interpreting the financial transactions of the government.
Government accounting shows the receipts and disbursement of public funds in all levels of government. This is governed by the constitution of the Federal Republic of Nigeria 1979 as amended in 1989.
PURPOSE OF PUBLIC SECTOR ACCOUNTING:
- To serve as a basis for decision making
- To depict the source of government revenue
- To serve as a basis for appraisal of the performance of management.
- To serve as the basis for planning and making budget. Etc.
EVALUATION:
- What is public sector accounting?
- Mention four purposes of public sector accounting
SUB-TOPIC 2: SOURCES OF GOVERNMENT REVENUE
- Direct taxes:
- Personal income tax
- Company income tax
- Petroleum tax
- Capital gain tax
- Indirect taxes:
- Import duties
- Export duties
- Tariffs
- Export duties
- Mining:
- Royalties on mineral resources e.g. Tin, gold etc.
- Revenue from export of crude oil
- Quarrying licenses
- Mining fees
- Fees:
- Court fees
- International passport fees
- Visa fees
- Advertisement fees (Bill board)
- Earning and sales:
- Federal government investments
- Sales of government properties e.g land, building
- Proceeds from prison farms
- Licenses and internal revenue:
- Arms and ammunition licenses fees
- Registration and licenses fees e.g company registration, club registration fees
- Churches registration fees
- Interest and repayment:
- Interest and repayment of loans granted to state government and government worker.
- General loan interest.
- Rent on government properties:
- Income from rent of government quarters
- Rent of government offices
- Rent of government vehicles
- Federal government land fees.
- Armed forces:
- Income from armed forces educational receipts
- Sales of small weapons
- Sales of armoured tanks, aircrafts
- Miscellaneous:
Any other income not mentioned above e.g money recovered from drug pushers etc.
EVALUATION:
Essay:
- Outline the major sources of revenue to:
- Federal government
- State government
- Local government
SUB-TOPIC 3: GOVERNMENT EXPENDITURE: government expenditure can be classified into two such as:
- Capital Expenditure
- Recurrent Expenditure
Capital Expenditure: This is the expenditure incurred by government which adds to the value of fixed asset. Such as: purchases of Buildings, plants machinery, motor vehicles, constructions of bridges and roads, constructions of rails etc.
Recurrent Expenditure: These are day-to-day costs of running the activities of an organization
of government department and ministries. These are: wages and salaries,
Transportation, repairs of motor vehicle, maintenance of buildings, payment for services. Etc
ILLUSTRATION:
The Federal Ministry of Works and Housing incurred the following in 2013.
| Construction of estates in Garki Central area | 350,000,000.00 |
| Bought wires | 200,000,000.00 |
| Purchase four site motors | 35,000,000.00 |
| Purchases Transformer | 505,300,000.00 |
| Construction of the roads | 455,000,000.00 |
| Paid civil engineers | 12,000,000.00 |
| Paid wages to the drivers | 500,000.00 |
| Renovate some buildings | 32,000,000.00 |
| Maintenance of the buildings | 44,000,000.00 |
| Constructions of General Hospital | 205,000,000.00 |
| Purchases of spare parts | 17,000,000.00 |
| You Are Required To Prepare Statement Of: |
- Capital Expenditure
- Recurrent Expenditure
SUGGESTED SOLUTION:
STATEMENT OF CAPITAL EXPENDITURE
| PARTICULARS | AMOUNT |
| N | |
| Purchases four site motor | 35,000,000.00 |
| Construction of estates in Garki Abuja | 350,000,000.00 |
| Purchases of transformer | 505,000,000.00 |
| Construction of roads | 455,000,000.00 |
| Construction of General Hospital | 205,000,000.00 |
| 1,550,300,000.00 | |
STATEMENT OF RECURRENT EXPENDITURE
| PARTICULARS | AMOUNT |
| N | |
| Bought wires | 200,000,000.00 |
| Paid civil engineers | 12,000,000.00 |
| Paid wages to the drivers | 500,000.00 |
| Maintenance of the Building | 44,000,000.00 |
| Purchases of spare parts | 17,000,000.00 |
| 273,500,00.00 | |
EVALUATION:
- List three types of Direct Tax.
- Mention two types of Mining as a source of Revenue to government.
SUB-TOPIC 4: HEAD AND SUB-HEAD:
HEADS: A Head is a code in public sector account, giving as a number and restricted to each items of the government revenue and expenditure for the purpose control of the expenditure and the allocation of the revenue.
SUB-HEAD: sub-head is under the Head or code. It is relates to each account sub allocated under each head. Examples:
| HEAD | ITEMS |
| 42 | personal emoluments |
| SUB-HEAD (under the Head) | |
| 1 | Basic Salaries |
| 2 | Rent allowance |
| 3 | Responsibility allowance |
| 4 | Tax deduction |
FUND ACCOUNT:
Fund is a separate fiscal and accounting entity in which resources are held, governed by special
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regulations segregation from other funds and established for special purposes on which resources of the fund may be expended.
CLASSIFICATION OF FUND:
Government fund: these are fund used to account for resources derived from the general taxing and other revenue of government e.g.
- Consolidated Revenue Fund
- Development fund
- Contingency fund
Proprietary fund: these are fund used to account for resources meant for business like operations of the government i.e. fund used for parastatals.
Fiduciary fund: these are fund used to account for resources held and managed by the government in the capacity of custodian trustee e.g. Trust fund and Deposit fund.
TYPES OF FUNDS
- General Fund: these are fund established to account for resources devoted to finance the general administration or services of the government. It is usually called Consolidated Revenue Fund/ Federal Government Account/ Current Fund.
- Capital Project Funds: the receipts and disbursement of all money used for the acquisition of capital assets are accounted for by Capital Project Fund. This is the Fund which is also being called Development Fund.
- Contingencies Fund that is specifically set aside for taking care of unforeseen expenditures of unanticipated event. e.g. expenses ion national disasters.
- Trust and Agency Fund: these are funds used to account for resources held by government as trustee. It is used for the purpose stated in the trustee deed. E.g. police Reward Fund, Armed Forces Comfort Fund, and Service Reward Fund.
- Debt service Funds: this is created to account for the resources devoted to the payment interest and principal on long-term general obligation debt.
- Special Fund: it is created for a specific purpose or function e.g. Personal Advance Fund, Treasury clearance Fund.
- Revolving Fund: this is a fund created to financial services provided by a designated Department to other designated department. e.g. reimbursement loan of N50m giving to each university to take care of the car refurbishment. It is also called Working Capital fund.
REASONS FOR FUND ACCOUNT IN PUBLIC SECTOR
- Financial control
- Future analysis and planning
- Meeting government target
- Diagnostic purposes
- Planning purpose
SUB-TOPIC 5: CAPITAL AND REVENUE ACCOUNT:
The government revenue is classified into two:
- Revenue receipt
- Capital receipt
- Revenue Receipt: This is the total amount of revenue collected by the government of a country from the major sources income.
- Capital Receipt: These are the total revenue received from proceeds of sales of assets and loans tied to projects. E.g. sales of assets, loans from institution tied to project etc.
ILLUSTRATION
The following balances have been extracted from the book of YOYO local government for the year ended 31st December 2013
| HEAD | ITEMS | ₦ |
| General revenue balance | 500,000.00 | |
| 201 | Salaries and wages | 300,000.00 |
| 202 | Maintenance of road | 230,000.00 |
| 204 | Telephone and postages | 120,000.00 |
| 205 | License | 210,000.00 |
| 301 | Lines | 342,000.00 |
| 302 | Repairs of motor vehicles | 111,000.00 |
| 303 | Statutory Allocation | 56,000.00 |
| 304 | Renovations of halls | 23,000.00 |
| 305 | VATallocation | 500,000.00 |
| 401 | Interest on fixed deposit accounts | 45,000.00 |
| 402 | Rent from shops | 230,000.00 |
| 404 | Sanitation fees | 332,000.00 |
| 503 | Sinking of bore holes | 200,000.00 |
| 504 | Constructions of market | 234,000.00 |
You are required to prepare a revenue and expenditure Statement for the YOYO local government for the year ended 31st December, 2013
SUGGESTED SOLUTION
REVENUE AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31ST
DECEMBER 2013
| HEA | EXPENDITURE | AMOUNT | HEAD | REVENUE | AMOUNT | |
| D | N | N | ||||
| 201 | Salaries | 300,000.0 | Balance | 5000,000.0 | ||
| 202 | Maintenance of roads | 0 | 205 | Licenses | 0 | |
| 230,000.0 | 210,000.00 | |||||
| 204 | Telephones & postage | 301 | Fines statutory alloc. | |||
| 0 | 342,000.00 | |||||
| 302 | Repairs of vehicle | 120,000.0 | 401 | Interest on depot. | ||
| 45,000.00 | ||||||
| 303 | Stationery | 0 | 305 | VATallocation | ||
| 5000,000.0 | ||||||
| 304 | Renovation of Halls | 111,000.0 | 402 | Rent from shops | ||
| 0 | 0 | |||||
| 503 | Sinking of borehole | 56,000.00 | 404 | Sanitation | 230,000.00 | |
| 504 | Construction of Market | 23,000.00 | 332,000.00 | |||
| 200,000.0 | ||||||
| 0 | ||||||
| 234,000.0 | ||||||
| 0 | ||||||
EVALUATION:
Essay:
- Essential financial Accounting page 391 Exercise 37. 3A
- Essential Financial Accounting page 393 Exercise 37.5
GENERAL EVALUATION:
Objectives:
- The two major government revenue are Capital and Receipt B. Capital and Recurrent C. Capital and Expenditure D. Capital and Revenue.
- Which of the following is NOT part of Re-current Expenditure? Purchase of furniture B. Paid for remuneration of staff C. Bought plants and Machinery D. Building
- All the following are part of capital Expenditure EXCEPT……….. A. Salaries and wages B. Sundry expenses C. Motor vehicles D. Spare parts of buildings
- The following are sources of revenue to government on indirect taxes EXCEPT
- Import duties B. Export duties C. company tax. D. Export duties
- Which of the following is NOT the purpose of Public sector accounting? A. To serve as a basis for decision making B. To depict the source of government revenue.
- To serve as a basis for appraisal of the performance of management. D. To serve as the basis for disputes and making budget.
- Which of the following is revenue receipt? receipt from the sales of goods. B. rents from promises sublet. C. interest on saving account. D. cash on sales of fixed assets.
- Which of these is NOT a capital expenditure to the government? beds B. theatre equipment C. X-ray Machine D. drugs
- Which of the following is the basis of accounting in the civil service?accrual B. cash C. incomes D.Expenditure
- Which of the following is the source of local government revenue? personal income tax B. Market rate C. sale of Armed forces property D. Repayment (interest and general)
Use the following information to answer questions 10 and 11.
The Education Department of DLHS local government incurred the following expenses in 2013.
| Construction of classroom | 500,000 |
| Purchase of table and chairs | 50,000 |
| Purchase of textbooks for library | 40,000 |
| Annual inter-house sport competition | 20,000 |
| Payment of teachers salary | 80,000 |
- Capital expenditure for the year was? N690, 000 B.N590, 000 C N500, 000 D. N140, 000.
- Recurrent Expenditure of the year was N170,000 B.N120,000 C.N100,000 D.N180,000
WEEK END ASSIGNMENT: Prepare a slide for presentation on the sources of Revenue to
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government. Group 1 to 5
PRE-READING ASSIGNMENT: Past question and Examination Revision
WEEK END ACTIVITY: Past Questions and preparation for Exams.
REFERENCE:
O.A. Longe, etal; Essential financial Accounting, tonad publisher, Lagos, Nigeria 2012.
Frank Wood, Business Accounting 1, Longman, Nigeria, 2008.
